THE CEMENT INDUSTRY OF COMMUNIST CHINA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-01093A001100040001-2
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 34
• Document Creation Date: November 16, 2016
• Document Release Date: October 27, 1999
• Sequence Number: 1
• Publication Date: April 27, 1956
• Content Type: IR

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PROVISIONAL INTELLIGENCE REPORT
THE CEMENT INDUSTRY OF COMMUNIST CHINA
CIA/RR PR-140
27 April 1956
CENTRAL INTELLIGENCE AGENCY
OFFICE OF RESEARCH AND REPORT!OCUMENT NO.
-SECRET--
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This material contains ? Information affecting
the Nationale Defense of the United States
within the meaning 'of the espionage laws,
Title 18, USC, Secs. 793 and 794, the trans-
mission or revelation =of which in any manner
to an unauthorized person is prohibited by law.
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S-E-C-R-E-T
PROVISIONAL INTELLIGENCE REPORT
THE CEMENT INDUSTRY OF COMMUNIST CHINA
CIA/RR PR-140
(ORR Project 47.993)
NOTICE
The data and conclusions contained in this report
do not necessarily represent the final position of
ORR and should be regarded as provisional only and
subject to revision. Comments and data which may
be available to the user are solicited.
Office of Research and Reports
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FOREWORD
The purpose of this report is to clarify some aspects of the
growth of the cement industry of Communist China over the years
1949-59-
The production of cement is an important index of construction
activity. A status report on the industry provides, therefore, one
of the steps to an understanding of the status of construction ac-
tivity in the economy of Communist China.
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CONTENTS
Summaxy . . . . . . .
I. Production, Capacity, and Operating Rates, 1949-57 ? ?
A. Production, 1949-57 ? 2
B. Capacity and Operating Rates, 1949-57 ? ? ? ? ? ? . . 3
II. Expansion Program, 1953-60 . . . . . . . . . . . . . . . 6
III. Investment Projects, 1952-57 . . . . . . . . . 8
A. Expansion of the Industry, by Type of Project . . . . 8
B. Capital Investment in the Industry, 1955-57 ? ? ? ? ? 13
Appendixes
Appendix A. Estimated Investment Expenditure on Cement
Plants in Communist China, 1955-57 . . . . . . 15
Appendix B. Comparison of Cement Production in Communist 19
China, the USSR, and the US, 1949-55 ? ? ? ? ?
Appendix C. Methodology . . . . . . . . ? . . . . . . . . . 21
Appendix D. Gaps in Intelligence . . . . . . . . . . . 25
Appendix E. Source References . . . . . . . . . . . . . . . 27
1. Production, Capacity, and Operating Rates in the Cement 4
Industry of Communist China, 1949-57 . . . . . . . . . .
2. Construction Projects in the Cement Industry of Communist
China, 1952 - 54 . . . . . . . . . . . . . . . . . . . . .
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Page
3. Construction Projects in the Cement Industry of Communist
China and Completion Dates Scheduled for 1955-57 . . . . 11
4+. Comparison of Cement Production in Communist China,
the USSR, and the-US, 1949-55 . . . . . . . . . . . . . 19
Illustrations
Figure 1. Communist China: Cement Production,
Production Capacity, and Operating Rates,
1952-57 (Chart) . . . . . . . .. . . . . . . . .
Figure 2. Communist China: Cement Industry -- Known,
Important Cement Plants, and the Investment
Program, 1953-57 (Map) . . . . . . . . . . . .
Following Page
4
Inside
Back Cover
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CIA/RR PR-140 S-E-C-R-E-T
(ORR Project 47.993)
THE CEMENT INDUSTRY OF COMMUNIST CHINA*
Summary
The cement industry of Communist China can be expected to produce
6.4 million metric tons** of cement in 1957, exceeding the planned goal
of 6.0 million tons. In addition, the increase in production capacity
planned by the industry under the Five Year Plan (1953-57), an increase
of 2.36 million tons over 1952 production capacity, probably will be
attained before the end of 1957.
Most of the additions to production capacity for the years 1949-54
were obtained by investment in the rehabilitation and reconstruction of
facilities which were well developed and modernized by the beginning
of World War II. The pattern for the years 1955-57, however, is one
in which the construction of new plants predominates, thus requiring
greater expenditures of time and investment funds per ton of increase
in production capacity.
The relative ease with which production capacity was expanded by
rehabilitation of the industry in the years 1949-52 and the rapid im-
provement in the rate of utilization of capacity in 1953 and 1954 were
primarily responsible for the rapid increase in the production of
cement from 0.66 million tons in 1949 to 4.6 million tons in 1954.
A further increase in the rate of utilization of capacity, from
an estimated 84 percent in 1954 to a probable 89 percent for the years
1955-57, will play an important part in the overfulfillment of the
1957 production goal. The major increase in these last 3 years of the
Five Year Plan, however, must come from the investment program for
increasing production capacity, with emphasis on the construction of
new cement plants.
* The estimates and conclusions contained in this report represent
the best judgment of ORR as of 1 January 1956.
** Tonnages are given in metric tons throughout this report.
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The industry's investment program for 1955-57 is considerably more
important to its growth than was its program for 1953-54. Whereas only
21 percent of the increase in annual production for 1954 over 1952 de-
pended upon an increase in annual production capacity, 84 percent
f
the estimated increase in annual production for 1957 over 95 will
depend on such anincrease. This fact, combined with the fact that
the expansion in production capacity scheduled for 1955-57 will be
achieved largely through the construction of new cement plants, in-
dicates that the cement industry will continue to play an important
part in the industrialization of Communist China. The Chinese, however,
will have to devote a proportionally greater amount of the investment
resources of the country to the cement industry than has been necessary
in the past.
An estimated capital investment of 242 million yuan* is required
to complete the 1955-57 investment program for increasing the produc-
tion capacity of the industry by 1.71 million tons.
I. Production, Capacity, and Operating Hates, 1949-
The cement industry of Communist China is the product of expanded
production and production capacity which was attained largely as a
result of development in the cement industry before the Communist
regime came into power. By the beginning of World War II the cement
industry had become one of the most modernized industries in all of
China, and the momentum gained thereby contributed greatly to the
-survivalof the industry through World War II and to its rapid revival
after the war.
A. Production, 1949-57.
After the consolidation of Chinese Communist military and
political power, production of cement rose rapidly from a low of
approximately 660,000 tons in 19+9 to 2.9 million tons in 1952
Equivalent to US $26 million, at the exchange rate of 1 yuan = 0.516
rupee; 1 rupee US $0.21.
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and 4.6 million tons in 1954 (see Table 1*). Preliminary reports on
the production of cement for the year 1955 have not yet been received,
but it is estimated that a production of 5.3 million tons** is feasible.
Because the Five Year Plan (1953-57) goal of an annual produc-
tion in 1957 of 6.0 million tons probably will be overfulfilled by about
0.4 million tons, the cement industry will have increased production
almost tenfold in 8 years.
B. Capacity and Operating Rates, 1949-57-
In addition to the 1957 production goal of 6.0 million tons of
cement, the Five Year Plan for Communist China stipulates that annual
production capacity is to increase by 2.36 million tons over the 5 years. 2/
Since this production goal implies a 5-year increase in annual production
of 3.14 million tons, whereas annual production capacity is to increase
by only 2.36 million tons, achievement of the goal will depend upon an
industry-wide increase in the operating rate (actual production as a
percentage of production capacity) in addition to the projected increase
in annual production capacity.
In 1953 and 1954, the first 2 years of the Five Year Plan, only
0.65 million tons were added to annual production capacity, whereas an-
nual production was increased by 1.74 million tons, or almost three times
as much. Fifty-four percent of the planned 5-year increase in the annual
production*** of cement was fulfilled by the end of 1954, whereas only 28
percent of the planned increase in annual production capacity was achieved.
Thus the increases in production in 1953 and 1954 were dependent upon a
considerable increase in the operating rate. (See Figure 1.****)
Table 1 follows on p. 4.
This is an increase of 15 percent over 1954 production. A planned
increase of 23 percent was first announced. Later, it apparently was
reduced to 21.7 percent. Although production for the first half of 1955
was said to have increased more than 20 percent over that for the first
half of 1954, cement was not among those products which were listed as
having fulfilled 50 percent or more of their respective planned annual pro-
duction goals for 1955. Furthermore, cement was not among those products
for which annual production was overfulfilled or almost fulfilled by the
end of November 1955. / (For serially numbered source references, see
Appendix E.)
*** All references to production and production capacity are in annual
terms, except where noted otherwise.
**** Following p. 4.
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Table 1
Production, Capacity, and Operating Rates in the Cement Industry
of Communist China
1949-57
(1)
(2)
(3)
Production
Operating
Year
(Million Metric
Tons)
Production Capacity a
~1Killion Metric Tons
Rate b
(Percent)
1949
0.66
N.A.
N.A.
1950
1.4
N.A.
N.A.
1951
2.5 /
N.A.
N.A.
1952
2.86 el
4.83 J
59.2
1953
3.9 '
5.10
76.4 J
1954
4.6o J
5.48
83.93 J
1955 (estimate)
5.3
6.0
89.0
1956 (estimate)
5.7
6.4
89.0
1957 (estimate)
6.4 J
7.19
89.0
a. Computed as the capacity achieved by the end of the calendar year.
The concept of production capacity and its application is discussed in
Appendix C.
b. Defined as column (1) divided by column (2) times 100. The kiln-
utilization rate and the operating rate are treated-as equivalents in
Chinese Communist discussions. J The operating rate will vary ac-
cording to whether annual capacity is figured on a year-end basis, as
in this table, or on the basis of an effective capacity for the given
year. (For further discussion, see Appendix C.)
c. Derived from Chou En-lai's statement that estimated output in
1954 (4.73 million tons) was 7.2.times that of 1949. J
e. J
f. Derived by subtracting from 5.48 million tons the 0.65 million
tons announced as having been added to pro-duction capacity in 1953
and 1954. i
h.
g
i. 10
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SECRET
COMMUNIST CHINA
CEMENT PRODUCTION, PRODUCTION CAPACITY,
AND OPERATING RATES, 1952-57
(Millions of metric tons)
*Estimated
SECRET
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Table 1
Production, Capacity, and Operating Rates in the Cement Industry
of Communist China
1949-57
(Continued)
j. The kiln-utilization rate reported for the first half of 195)4 11
is assumed to apply for the entire year.
k. The Five Year Plan calls for 6.0 million tons. 12
1. Derived by adding to the estimated production capacity for 1952
the planned increase of 2.36 million tons in production capacity under
the Five Year Plan. This is effective capacity as well as year-end
capacity.
Such an increase in the operating rate clearly depended upon the
existence of unutilized capacity, and the increases in capacity achieved
from 1949 through 1952 resulted primarily from rehabilitation* of capac-
ity which existed in the pre-Communist era, especially in the Northeast
Area.
By contrast, production in the last 3 years of the Five Year
Plan must increase by only 1.4 million tons, whereas annual production
capacity must be increased by 1.71 million tons to fulfill the respective
goals of the Five Year Plan. If this increase in production capacity
is achieved by the beginning of 1957, operation at the estimated 1954
operating rate of 84 percent would yield an increase in production equal
to the 1.4-million-ton increase required to fulfill the 1957 goal.
In order to facilitate increases in production, the increased
capacity must be available for use. The question of timing is therefore
an important one. If it is assumed that the full increase of 1.71 million
* In this report, four types of additions to production capacity are
distinguished, as follows: (1) rehabilitation -- the restoration of
previously existing capacity; (2) reconstruction -- rehabilitation plus
some additional expansion beyond previous capacity; (3) expansion --
additions to a given level of capacity not involving rehabilitation;
and (4) new construction.
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tons in production capacity is achieved in the period 1955-57 and if
the operating rate is to remain at 84 percent, then the planned 1.71-
million-ton increase in capacity must be achieved by the end of 1956
or thereabouts: that is, the planned production of 6.0 million tons
in 1957 would require a usable annual production capacity of 7.19
million tons in early 1957 if the operating rate is to be only 84
percent.
The Chinese Communists, however, were not satisfied with the
1953 operating rate of 76.4 percent and may not be satisfied with the
84 percent attained in the first half of 1954. -Since they claim that
the standard operating rate of rotary kilns in the USSR is 89 per-
cent and that several kilns in China were operating at 88 percent or
more in 1953, 131, they may be aiming at an operating rate as high as
89 percent.* If this rate were achieved for the years 1955-57, a to-
tal production capacity of only 6.74 million tons by the end of 1956
would permit China to reach a production of 6.0 million tons for 1957,
and if the remaining 0.45 million tons of production capacity were
added in 1957, the annual production capacity would be 7.19 million
tons, and both the production and capacity goals of the Five Year Plan
would be fulfilled.
The production-goal for 1957 appears to be conservative in
view of the estimated size and date of completion of the expansion
program scheduled for the cement industry in the years 1955-57. The
full increase of 1.71 million tons of production capacity required
in the 1955-57 period apparently is accounted for by projects which
were already under way in 1955.** If all of these projects are
completed by the end of 1956, as appears quite probable, the cement
industry of Communist China would be able to overfulfill the goal
for the annual production of cement in 1957, since it is unlikely
that the industry will continue to operate at only 84 percent of
capacity.
II. Expansion Program, 1953-60.
Over the period 1953-60 there are two important relationships
between the increase in production and the expansion of the pro-
duction capacity of the cement industry of Communist China.
The feasibility of such a rate is discussed in Appendix C.
The expansion program is described in detail in III, below.
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1. Annual production capacity apparently is to be increased by
3.6 million tons in the period 1953-59,* and over the 7 years this im-
plies an average annual increase of 0.51 million tons. The 5-year in-
crease (1953-57) of 2.36 million tons requires an average annual increase
of 0.47 million tons. Since in the first 2 years of the Five Year Plan
a total increase of only 0.65 million tons was achieved, 1.71 million
tons must be added over the years 1955-57, or an annual average of 0.57
million tons. If the 1959 goal is to be achieved, 2.95 million tons must
be added to annual production capacity, or an average annual increase of
0.59 million tons over the years 1955-59. Thus the average annual commit-
ment to increase production capacity is growing over the period 1953-59.
2. The increasing importance of the expansion program is further
illustrated by its relation to the increases in annual production from
1953 to 1957. Of the increase in production achieved for 1954 over 1952,
only 21 percent is attributable to the investment program which increased
production capacity.** Of the probable increase in production for 1957
over 1954, however, 84 percent is dependent upon the scheduled increase
in production capacity.*** Thus the investment program is becoming in-
creasingly important in the development of the Chinese Communist cement
industry. This program is examined in detail in the following section.
* Derived as follows: Ten above-norm cement plant projects, to be
completed from 1953 to 1959, are to add 3.08 million tons to production
capacity. 14 ("Above-norm" and "below-norm" are references to the norm
of investment for the cement industry -- 6 million yuan. Classification
above or below the norm is a mechanism for facilitating management and
control of the project.) Annual capacity is to increase by 3.6 million
tons when all the projects, both above- and below-norm, which are started
in the period of the Five Year Plan are completed. 15/ Below-norm pro-
jects probably will be completed in 2 years or less, so that any such
projects started in 1957 should be completed by the end of 1959? It can
be inferred, therefore, that the increase of 3.6 million tons in annual
production capacity is to be achieved by the end of 1959.
** Based on the estimate that, in the aggregate, 70 percent of the
announced increase in annual production capacity for 1954 over 1952 was
operated at an average rate of 80 percent.
*** Based on the assumption that the scheduled expansion of production
capacity for 1955-57 is effective for the year 1957 and operated at a
rate of 89 percent.
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S-E-C-R-E-T
III. Investment Projects, 1952-57?
The extent of the investment program for the cement industry of Com-
munist China is indicated by the fact that at least 90 percent of the
cement plants are to be reconstructed or technically improved in the
period of the Five Year Plan. 16 The magnitude of the present tasks
facing the cement industry is reflected in the pattern of major invest-
ment projects scheduled for the industry in the years 1955-57, a markedly
different pattern from that of recent years.
A. Expansion of the Industry, by Type of Project.
From 1949 to 1952, expansion of production capacity of the
cement industry was obtained_primarily by restoring previously existing
capacity. In 1953 and 1954 the pattern was one of either expanding or
reconstructing extant facilities. (See Table 2.*) Most of the increased
production capacity scheduled to be available in the period 1955-57,
however, will come from the construction of new plants. (See Table
3.**)
Four of the projects scheduled for completion in 1955-57
involve new construction, and two involve expansion or reconstruction
of existing facilities.*** Of these two, the Kung-yuan plantreconstruc-
tion is so extensive that it is virtually new plant construction.****
The pattern of investment projects in the cement industry suggests
that 1955 was the critical year of the Five Year Plan for this industry.
The Harbin project was completed in April; the Nan-p'ing project was
virtually completed in June; and the major projects at Ta-t'ung, Yung-
teng, and Kung-yuan were to be well under way in 1955?**
* Table 2 follows on p. 9.
** Table 3 follows on p. 11.
*** Inconclusive data show that two other plants, reported to be at
Hsiang-t'an and Pao-t'ou, may be under construction or expansion, 17/
but the character and extent of construction is not known.
**** The Pauley Report asserted that it was not practical to restore
this plant, because of extensive removals of machinery and destruction
of equipment and buildings. 18
***** For the location of the most important plants of the cement in-
dustry of Communist China, see the map, Figure 2, inside back cover.
(Text continued on p. 12.)
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Reports on the rate of progress and expected completion of con-
struction at Ta-t'ung are not uniform, but the project is a huge one and
probably will not be in operation before the middle of 1956. The recon-
struction at the Kung-yuan plant, scheduled to be 92 percent completed
by the end of 1955, was behind schedule in April because most of the work
planned for the first quarter of 1955 had not been initiated and work for
the second quarter was yet to be decided upon.
The construction of a second cement plant in Sinkiang (probably
in the Urumchi area) is interesting, especially in view of the estimated
size of the plant. If the choice of location is an economic one, it
should indicate the size of demand which is anticipated for the Urumchi
area and Sinkiang in general. The starting date of construction is not
known, but the allocation of capital investment for Sinkiang in 1955
apparently included funds for the construction of the plant. If con-
struction was started in mid-1955 and no serious problems are encountered
in the supply of machinery and equipment, the plant should be completed
before the end of 1956.
The construction of the Yung-teng cement plant near Lan-chou
gives to the Northwest Area 2 of the 4 large cement plants now under
construction. With the completion of the Lan-thou - Sinkiang Rail-
road the Northwest Area will have at its terminals the Yuang-teng
plant in the east and the two Sinkiang plants in the northwest. Thus
the 1955-57 investment program of the cement industry has significant
implications for the future of construction in the Northwest Area.
The investment program for 1955-57 is important, however, in
its difference from the program for 1953-54 not only because of the
greater increase in production capacity which it affords, but also
because the increases in capacity planned for 1955-57 will be more
costly than those in 1953-54 and earlier, in both time commitments and
investment expenditures per ton of increased capacity.
Production capacity in the cement industry can be increased in
a number of ways.* The respective capacities of different departments
of given plants may differ, so that capacity may be increased by the
simple expedient of expanding one department. The capacity of the
grinding facilities, for example, may be so much greater than that of
For a comparison of production of cement in Communist China, the US,
and the USSR, see Appendix B.
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the kiln department* that installation of preheating equipment (or an-
other kiln) will increase the production capacity of the plant. An
expansion of grinding facilities may permit fuller utilization of the
kiln department. Both grinders and kilns may be added, or machinery
and equipment may be remodeled. Finally, complete new plants may be
constructed.
With reference to the different means by which production
capacity was increased in 1953-54 as contrasted to 1955-57, the fact
that the capacity of the industry is to be increased by the construc-
tion of new plants in 1955-57 should indicate, under rational planning,
that the total investment costs per ton of capacity increase** are
presently lower for new plant construction than they would be for
further expansion and/or reconstruction schemes. Conversely, expansion
and/or reconstruction schemes must have been the cheaper means of in-
creasing production capacity in 1953-54. Therefore, the change in the
pattern of additions to production capacity from 1953-54 to 1955-57
indicates that the relatively inexpensive means of increasing capacity
employed in the past are not now available on a scale which will
significantly contribute to the fulfillment of capacity goals.
B. Capital Investment in the Industry, 1955-57.
A clear statement on capital expenditure required in Communist
China to construct cement plants of given production capacities is
not yet available, although it has been stated recently in the Chinese
Communist newspaper, Kung-jen Jih-pao, that 50 million yuan is a "sum
sufficient to construct a large modern cement plant." L2/ It is
estimated that 50 million yuan represents the planned capital expendi-
ture for constructing a cement plant with an annual production capacity
of 360,000 tons.***
In practice, the capacity of grinding facilities should be some-
what greater than that of the kiln or kilns.
** Economy-wide costs, including transportation costs for distributing
the product.
This estimate is based upon the following considerations:
1. The quoted statement must have some relevance to the size
of cement plants actually being constructed in Communist China. (Plan-
ning costs have been announced by the Chinese Communists quoting costs
for building textile mills, iron and steel combines, tractor plants,
and motor vehicle plants of given capacities, and plants of those capaci-
ties have been or are being constructed.)
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On the strength of this estimate and of the estimates for the
Harbin and Kung-yuan projects, the 1955-57 projects (accounting for the
planned increase in production capacity of 1.71 million tons during
1955-57) will require a capital investment of about 242 million yuan.*
2. Fairly reliable evidence (see the footnotes to Table 3,
p. 11, above) indicates that all 4+ new cement plants are of a capacity
of 360,000 tons per year.
3. The value of the capital investment in the machinery and
equipment imported for the plants at Yung-teng and Ta-t'ung (the value
f.o.b. East Germany plus estimated transportation costs -- converted
from rubles at a_June 1955 rate of 0.5 yuan equals 1 ruble) constitutes
42 to 44 percent of the 50-million-yuann capital investment assumed to
apply to these plants. This is consistent with the general relation-
ship stated for the period of the Five Year Plan -- for industry, 40
percent of total capital construction investments are to be devoted
to the purchase of machinery and equipment. L3
* See Appendix A.
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ESTIMATED INVESTMENT EXPENDITURE ON CEMENT PLANTS IN COMMUNIST CHINA
1955-57
In order to estimate the total capital investment required for the
planned 1.71-million-ton increase in production capacity.of cement plants
in Communist China for 1955-57, some estimate must be made of the required
capital expenditure for the Kung-yuan and Harbin projects.
The structure of costs in the construction of cement plants of dif-
ferent sizes follows the economic proposition that it is more economical
to build a large plant than a small one (when economy is defined as cost
per ton of annual capacity). Although an estimate of the cost in Com-
munist China of building a cement plant with a capacity of 360,000 tons
per year can be made from a statement by the Chinese Communist press,
some other means must be used to estimate the cost of building smaller
plants. A study of the planned capital expenditure in the cement in-
dustry of India provides the best available means for making such an
estimate.
An estimated capital investment of 73 rupees per ton of annual capac-
ity is required for erecting a new cement plant in India with an annual
capacity of 360,000 tons.* Comparing the respective costs of constructing,
in Communist China and India, a cement plant with a capacity of 360,000
tons per year, the proportional relationship is as follows:
China: Yuan cost per ton 139
India: Rupee cost per ton 73
equals 1.90
* This report computes annual capacity from rated daily capacity ex-
panded on the basis of 365 working days in the year. The cement indus-
try in India computes annual capacity from rated daily capacity on the
basis of only 330 working days in the year. The figure cited above
represents an estimated capital investment of 80 rupees per ton of an-
nual capacity for a new cement plant in India with an annual capacity
of 330,000 tons, 4 converted to express the cost per ton on the basis
of 365 working days in the year.
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The proportional relationship between the currencies of the two
countries* is as follows:
Rupees 0.516
equals 1.94+
For the construction of cement plants with a capacity of 360,000
tons per year, therefore, the yuan is neither overvalued nor under-
valued compared with the rupee. The further considerations, that the
economies of Communist China and India are similar in structure and
that both countries are dependent upon imports of -cement plant ma-
chinery and equipment from the European area,** seem to warrant the
use of the Indian cost variations in estimating the cost of the
Harbin and Kung-yuan projects.
The range of cost variation by size of new plant in the cement
industry of India is as follows:
Approximate Annual
Capacity of New Plant Index of Cost
(Thousand Metric Tons) per Ton of Annual
36o 100
218 125
log 150
With this cost index an estimate of the -cost of the projects in
the cement industry of Communist China for 1955-57 can be made, as
follows:
* The February 195+ exchange rate of 0.516 rupees equals 1 Yuan (new
currency) is used as most appropriate for the costs and time period
involved.
** The Indian tariff on imports of machinery and equipment does not
significantly a:1fect the capital cost of erecting -cement plants. L5/
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Project Cost
per
Project Ton (Yuan)
Total Cost
of Project
(Million Yuan)
Harbin (expansion, 100,000 tons)
135*
14
Nan-p'ing (new, 360,000 tons)
139
50
Yung-teng (new, 360,000 tons)
139
50
Ta-t'ung (new, 360,000 tons)
139
50
Sinkiang No. 2 (new, 360,000 tons)
139
50
Kung-yuan (reconstruction, 200,000 tons)
139**
28
* Based on the cost index (150) for a new cement plant with a capac-
ity of 109,000 tons per year, less 35 percent for the fact that Harbin
is an expansion project. The Indian study uses a 20-percent reduction
for expansion projects, but half of the Indian expansion projects are
more than doubling their original capacities. L6 A reduction of 35
percent is used, therefore, for the more favorable conditions under
which the Harbin project is being expanded.
** Based on the cost index (125) for a 218,000-ton plant, reduced by
20 percent to account for the usable facilities remaining from the old
Kung-yuan plant.
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APPENDIX B
COMPARISON OF CEMENT PRODUCTION IN COMMUNIST CHINA,
THE USSR, AND THE US
1949-55
Table 4 J
Year
Communist China
USSR J
US
1949
0.66
8.1
35.5
1950
1.4
10.2
38.1
1951
2.5
12.1
41.3
1952
2.86
13.9
41.9
1953
3.9
16.0
44.5
1954
4.6o
19.0
45.8
1955
5.3
22.4
50.4 J
a. Production data for the US are for Portland ce-
ment. The proportions of Portland cement in the
production data for the USSR and Communist China
are not available.
b. 4L7 J. Data for 1950-54 are computed from monthly
averages supplied by the Central Statistical Admin-
istration of the USSR.
c. 48 . Excluding Puerto Rico. Converted on the
basis of 5.85 barrels to the metric ton.
d. Unpublished Bureau of Mines estimate based on
production for the first 10 months of 1955.
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APPENDIX C
METHODOLOGY
1. Production Capacity.
In discussing production capacity, three concepts are to be
distinguished, especially for international comparisons. Installed
production capacity is the rated daily capacity of the machinery and
equipment when newly installed, operating 24 hours daily, 365 days
of the year. Actual production capacity is the installed production
capacity discounted by some specified number of days to permit normal
repairs for maintenance of the daily rated capacity. Actual produc-
tion is the tonnage produced, which will be above or below the actual
production capacity as the rate at which materials are run through
the kiln and repair plus breakdown periods vary.
The Chinese Communists have not revealed which concept of
capacity they use, but the Soviet cement industry apparently uses
installed capacity. / It is assumed, therefore, that the installed
capacity concept can be used for Communist China.
Replies to a questionnaire sent to US cement plants by the
Bureau of Mines indicate that annual production capacity is computed
practically on the basis of a 365-day year, so that US figures on
production capacity approach closely a concept of installed produc-
tion capacity. On the other hand, in the Indian cement industry,
capacity is rated on the basis of 330 working days in the year. 50
Because the definition of capacity affects the rate at which
a plant can be said to operate -- that is, the rate of utilization
of capacity -- it is also important in the determination of what a
feasible operating rate may be for a given country..
2. Operates Rates.
a. The ease with which the cement industry of Communist China
can attain an operating rate of 89 percent in 1957 will vary with the
definition of production capacity.
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The cement industry of India operated at about 96 percent of
capacity in the 3 years 1952-5+, 51 whereas the US industry operated at
84 to 90 percent of capacity in 1950-54+. and was operating at 97 percent of
capacity in the 12 months ending July 1955. 52 If the figures for India
are adjusted to a 365-day base for capacity, the operating rate for the
Indian cement industry becomes 86 to 87 percent.
An operating rate of 87 to 90 percent, on an installed
production capacity basis, thus appears to be feasible for the cement
industry. The question remains as to whether an 89-percent figure is
intended and feasible for the cement industry of Communist China.
In 1953 the Chief of the Control Bureau of the Construction
Materials Industry was apparently calling for cement plants in Communist
China to match the performance of the industry in the USSR, where the
standard operating rate of the rotary kiln was given as 89 percent. 53
Thus it is assumed in this report that the Chinese Communists are aiming
at an operating rate of 89 percent. It is believed that such an operat-
ing rate is attainable for 1955-57 on the basis of installed production
capacity.
b. The rate. of kiln utilization for the industry has been used
in this report as the equivalent of the operating rate in order to
derive the production capacity of the industry. Aside from the fact
that the Chinese Communists appear to use it as such, this procedure is
warranted because, in the past, the kiln departments have been the
limiting factors in the production of cement. But with the production
of more mixed cement as planned by the industry, the capacity of the
grinding facilities may become so much greater than the capacity of
the kilns that the rate of kiln utilization may not reflect accurately
the operating rate of the industry. Unless some adjustment for this is
then made, the use of a rate of kiln utilization to estimate the pro-
duction capacity is unwarranted. Because the production of mixed ce-
ments in 195+ is estimated at less than 10 percent of total production,
the distortion is not a significant one.
3. Effective Capacity andYear-End Production Capacity.
Annual production capacity can be expressed as the annual capac-
ity available to the industry at the end of a calendar year (year-end
capacity), but it isIexpressed more meaningfully as effective capacity:
that is, 1 January capacity plus capacity added between 1 January and
31 December prorated for actual time available for production.
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Capacity given as effective capacity, when compared to produc-
tion, gives a truer picture of the operating rate for the industry,
whereas the use of year-end capacity understates the rate at which
capacity actually is utilized during the year. Year-end capacity has
been used in this report, however, for the sake of simplicity.
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APPENDIX D
GAPS IN INTELLIGENCE
1. Product Quality and Types.
One of the most serious gaps in intelligence on the cement indus-
try of Communist China is the lack of comprehensive data on the quality
and types of cement produced.
There is no doubt that the industry has produced and plans to
j Mixed cements are cements
increase the production of mixed cements. 54
of lower structural strength than ordinary Portland grades and are ob-
tained by adding pulverized adulterants such as shale and slag as the
cement clinker is being ground into the finished product.
Mixed cements are satisfactory for foundation work of various
types and represent a considerable saving for the industry and the
country if produced and used where appropriate. J
The problem of maintaining the quality of given types of cement
appears to be a fairly serious one for the industry. Only three cement
plants kept their product up to standard in the first half of 1954. Con-
versely, the production of cement of unnecessarily high quality is not
an unimportant aspect of waste in the industry. 56
Since production figures for the country are given simply for
"cement," intelligence estimates cannot show a breakdown by types of
cement, and nothing is known as to the amount of unusable cement which
might be included in official figures.
2. Source of Supply of Cement Plant Machinery and Equipment.
Another serious gap in intelligence is the lack of specific infor-
mation on how the industry secured the machinery and equipment necessary
to the expansion of production capacity and how it is to be secured in
the future.
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The cement industry is still dependent upon imports in the con-
struction of complete cement plants, but too little is known about the
domestic supply of individual parts to cement plants.
3. Plant Production and Capacity.
Much more information is needed on the output of particular
plants and the production capacity of each, especially of the smaller
plants.
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APPENDIX E
SOURCE REFERENCES
Evaluations, following the classification entry and designated
"Eval.," have the following significance:
Source of Information
Doc. - Documentary
A - Completely reliable
B - Usually reliable
C - Fairly reliable
D - Not usually reliable
E - Not reliable
F - Cannot be judged
1 - Confirmed by other sources
2 - Probably true
3 - Possibly true
1+ - Doubtful
5 - Probably false
6 - Cannot be judged
"Documentary" refers to original documents of foreign governments
and organizations; copies or translations of such documents by a staff
officer; or information extracted from such documents by a staff
officer, all of which may carry the field evaluation "Documentary."
Evaluations not otherwise designated are those appearing on the
cited document; those designated "RR" are by the author of this report.
No "RR" evaluation is given when the author agrees with the evaluation
on the cited document.
STATSPEC
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